80 FR 39460 - Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 4.3, Record of Written Complaints

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 131 (July 9, 2015)

[Federal Register Volume 80, Number 131 (Thursday, July 9, 2015)]
[Notices]
[Pages 39460-39462]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-16728]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75355; File No. SR-NSX-2015-03]


Self-Regulatory Organizations; National Stock Exchange, Inc.; 
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To 
Amend Rule 4.3, Record of Written Complaints

July 2, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ 
notice is hereby given that on June 23, 2015, National Stock Exchange, 
Inc. (the ``Exchange'' or ``NSX'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change, as 
described in Items I and II below, which Items have been prepared by 
the Exchange. The Exchange has designated this proposed rule change as 
``non-controversial'' pursuant to section 19(b)(3)(A) of the Act \3\ 
and provided the Commission with the notice required by Rule 19b-
4(f)(6)(iii) under the Act.\4\ The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange is proposing to amend Exchange Rule 4.3, Record of 
Written Complaints, to conform the requirements of the rule to those 
contained in the rules of other self-regulatory organizations 
(``SROs''). The Exchange is also proposing to amend Rule 4.3 to 
eliminate a requirement that complaints and actions with respect 
thereto be forwarded promptly to the Exchange. The text of the proposed 
rule change is available on the Exchange's Web site at www.nsx.com, at 
the Exchange's principal office, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and statutory basis for, 
the proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, Rule 4.3(a) requires that each Exchange Equity Trading 
Permit (``ETP'') Holder \5\ keep and preserve a file of all written 
customer complaints \6\ and action taken by the ETP Holder with respect 
to such complaints, for a period of not less than five years, the first 
two of which must be in a readily accessible place. The Exchange 
proposes to amend the rule to reduce the retention period for records 
of customer complaints and ETP Holder actions with respect thereto from 
five years to four years, the first two of which must be in a readily 
accessible place.
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    \5\ Rule 1.5E.(1) defines ETP as the Equity Trading Permit 
issued by the Exchange for effecting approved securities 
transactions on the Exchange's trading facilities.
    \6\ Current Rule 4.3(c) defines a ``complaint'' as ``any written 
statement of a customer or any person acting on behalf of a customer 
alleging a grievance involving the activities of an ETP Holder or 
persons acting under the control of the ETP Holder in connection 
with (1) the solicitation or execution of any transaction conducted 
or contemplated to be conducted through the facilities of the 
Exchange or (2) the disposition of securities or funds of that 
customer which activities are related to such a transaction.''
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    The Exchange's proposed rule change will align the retention period 
prescribed in Exchange Rule 4.3(a) with the retention periods for 
customer complaint information prescribed in the rules of other SROs. 
For example, FINRA Rule 4513 requires that FINRA members keep and 
preserve a record of customer complaints and any action taken by the 
FINRA member with respect to such complaints for a period of not less 
than four years.\7\ Other national securities exchanges that previously 
had a five-year retention period for customer complaint information 
have amended their rules to reduce the record retention period for this 
information from five years to four years.\8\ The Exchange believes 
that amending Rule 4.3 to align its recordkeeping provisions with those 
contained in the rules of other SROs will promote consistency and 
uniformity, enhance regulatory efficiencies, and reduce the compliance 
burden on ETP Holders that would result from the application of 
different retention periods for customer complaints and any actions 
with respect thereto.
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    \7\ FINRA Rule 4513 requires that ``[e]ach [FINRA] member shall 
keep and preserve in each office of supervisory jurisdiction either 
a separate file of all written customer complaints that relate to 
that office (including complaints that relate to activities 
supervised from that office) and action taken by the member, if any, 
or a separate record of such complaints and a clear reference to the 
files in that office containing the correspondence connected with 
such complaints. Rather than keep and preserve the customer 
complaint records required under this Rule at the office of 
supervisory jurisdiction, the member may choose to make them 
promptly available at that office, upon request of FINRA.''
    \8\ See, e.g., BATS Exchange, Inc. and BATS Y-Exchange Inc. Rule 
4.3; See also Securities Exchange Act Release No. 74656 (April 6, 
2015), 80 FR 19381 (April 10, 2015) (SR-BATS-2015-25) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Amend Rule 4.3, Record of Written Complaints) and Securities 
Exchange Act Release No. 74703 (April 10, 2015), 80 FR 20520 (April 
16, 2015) (SR-BYX-2015-20) (Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change to Amend Rule 4.3, Record of 
Written Complaints).
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    The Exchange is proposing to further amend Rule 4.3 by deleting 
paragraph (b), which provides that, upon an ETP Holder's receipt of a 
complaint, a copy shall be forwarded promptly to the Exchange and a 
report of the action taken by the ETP Holder on the complaint shall 
also be forwarded to the Exchange. The Exchange notes that this 
requirement to report upon receipt of a customer complaint and upon any 
action with respect thereto is not present in the rules of other 
SROs.\9\ The Exchange believes that maintaining a separate and distinct 
reporting requirement for customer complaints and actions in response 
thereto would be contrary to the considerations of uniformity and 
consistency that the Exchange is seeking to advance in proposing the 
amendments to Rule 4.3.
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    \9\ See FINRA Rule 4513, BATS Exchange, Inc. and BATS Y-
Exchange, Inc. Rule 4.3. See also EDGA Exchange, Inc. and EDGX 
Exchange Inc. Rule 4.3, Record of Written Complaints.
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    The Exchange notes that there are already mechanisms in place in 
the securities industry that provide for the prompt reporting of 
complaints, settlements and other matters that present issues of 
potential regulatory concern (e.g., written complaints

[[Page 39461]]

alleging fraud or misappropriation of customer funds or securities, and 
settlements in excess of certain monetary amounts).\10\ The Exchange 
believes that maintaining a separate and distinct reporting requirement 
in its rules for customer complaints and actions in response thereto 
imposes an unnecessary regulatory and compliance burden on ETP Holders. 
Moreover, ETP Holders are obligated to furnish complaint information to 
the Exchange upon request and the proposed rule change does not in any 
way alter or impact that Exchange's ability to access that 
information.\11\
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    \10\ See, e.g., FINRA Rule 4530, Reporting Requirements.
    \11\ Specifically, Rule 4.2, Furnishing of Records, provides, in 
relevant part, that ``[e]very ETP Holder shall furnish to the 
Exchange, upon request and in a time and manner required by the 
Exchange . . . any records, files or financial information 
pertaining to transactions executed on or through the Exchange . . . 
[and] the [E]xchange shall be allowed access, at any time, to the 
books and records of the ETP Holder in order to obtain or verify 
information related to transactions executed on or through the 
Exchange or activities relating to the Exchange.''
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Exchange Act and the rules and regulations thereunder applicable to 
the Exchange and, in particular, the requirements of section 6(b) \12\ 
of the Exchange Act. Specifically, the Exchange believes that its 
proposal is consistent with the requirements of section 6(b)(5) \13\ 
that the rules of an exchange be designed, among other things, to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in regulating, clearing, 
settling, processing information with respect to, and facilitating 
transactions in securities, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. Aligning the 
requirements of Rule 4.3 with the rules of other SROs will provide a 
further harmonization of securities industry rules applicable to ETP 
Holders. This will result in greater uniformity, enhanced regulatory 
efficiency, and a reduced potential for inconsistent regulatory 
approaches with regard to customer complaint recordkeeping and 
reporting.
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    \12\ 15 U.S.C. 78(f)(b).
    \13\ 15 U.S.C. 78(f)(b)(5).
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    Similarly, the Exchange's proposal to delete paragraph (b) of Rule 
4.3, thereby eliminating the requirement that complaints and the ETP 
Holder's action with respect thereto be reported to the Exchange, is 
consistent with section 6(b)(5) of the Act in that it will remove a 
requirement that, if left in place, imposes an unnecessary regulatory 
and compliance burden and detracts from the goal of fostering 
cooperation and coordination in the regulation of ETP Holders. Deleting 
the separate and distinct reporting requirement will also provide 
consistency and avoid regulatory duplication, which will operate to 
promote just and equitable principles of trade, remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, protect investors and the public 
interest. The Exchange further submits that removing the reporting 
requirement will alleviate a regulatory and compliance obligation and 
allow regulatory resources to be directed to matters with greater 
impact to the protection of investors.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule amendment will 
impose any burden on competition that is not reasonable or appropriate 
in furtherance of the purposes of the Act. The proposed rule change is 
not designed to address any competitive issue in the U.S. securities 
markets or have any impact on competition in those markets because it 
is intended to provide for greater harmonization of Exchange rules with 
the rules of other SROs. The Exchange submits that the proposed 
amendment will promote regulatory efficiency and consistency while 
reducing the regulatory compliance burden on ETP Holders.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    The Exchange has not solicited or received comments on the proposed 
rule change from market participants or others.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not (i) significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to section 19(b)(3)(A) of the Act \14\ and Rule 19b-4(f)(6) 
thereunder.\15\
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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NSX-2015-03 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-NSX-2015-03. This file 
number should be included in the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and

[[Page 39462]]

printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NSX-2015-03 and should be 
submitted on or before July 30, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16728 Filed 7-8-15; 8:45 am]
 BILLING CODE 8011-01P